Frequently Asked Questions
What's a typical sales commission rate?
SaaS: 10% of ARR for AEs. SDRs: $10-20K base + meetings booked. Insurance: 50-100% of first-year premium. Real estate: 5-6% of sale price (split with brokerage). Tech hardware: 3-8% of revenue. Higher for new business, lower for renewals.
Should I pay commission on revenue or profit?
Most pay on revenue (simpler, faster commission). Profit-based is fairer but creates conflicts (sales team blames operations for low profit). Hybrid: revenue commission with kickers for high-margin or strategic accounts. Avoid commission on bookings - pay on cash collection.
How do I design a commission accelerator?
Most common: 1x commission below quota, 1.5-2x at 100-150% of quota, 2-3x above 150%. Accelerators motivate top performers and protect against sandbagging. Cap commissions only above 200%+ of quota - caps reduce motivation for blockbuster deals.
What is OTE?
On-Target Earnings is the total pay a rep expects when they hit exactly 100% of quota: base salary plus variable commission. It's the benchmark number for comparing comp packages. Common pay mixes are 50/50 for AEs and 70/30 for SDRs.
Why use tiers instead of a flat rate?
Tiers reward incremental performance, paying 2-3x the base rate once a rep clears quota. A flat rate treats every dollar the same and does nothing to separate or motivate top performers. Use the flat-rate comparison in this tool to see exactly how much more a high performer earns under the tiered plan.
What is the accelerator and how does it work?
The accelerator multiplies your tier-3 rate on sales above the highest threshold. For example, a 12% rate with a 1.5x accelerator pays an effective 18% on bookings in that band, rewarding reps who push well past quota.
Is it a good idea to cap commissions?
Usually not. Caps signal that you don't trust your top sellers and can push them toward a competitor. If a big payout worries you, fix the quota before you cap the plan.
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Business Information Disclaimer: Estimates only. Not professional business advice.
This calculator provides estimates for informational purposes only. Business results vary by industry, market conditions, and execution. Not a substitute for professional business consulting, accounting, or legal advice. Consult qualified professionals before making business decisions.